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August Unemployment Rate Fell to 8.1% because 368,000 People Left the Labor Force

Posted by FactReal on September 7, 2012

Unemployment rate fell 0.2% (from 8.3% to 8.1%) because fewer Americans are looking for work, not because more Americans are finding jobs
Source: Bureau of Labor Statistics – August 2012 employment report (Released September 7, 2012)
Sources: Bureau of Labor Statistics, Wall Street Journal, Sweetness & Light, AEI
The unemployment rate is at 8.1% according to the Labor Dept.
(12,544,000 unemployed people divided by 154,645,000 in the civilian labor force).
The unemployment rate fell 0.2% (from 8.3% to 8.1%).
88,921,000 Americans are NOT in the labor force.
368,000 people simply dropped out of the labor force in just the month of August and did not even look for a job.
119,000 fewer Americans were employed in August than there were in July.
The participation rate fell from 63.7% to 63.5%. This is a 30-year low.
(The labor force participation rate is the percentage of the people in the civilian non-institutionalized population who either had a job or were actively looking for one)
The unemployment rate would be 11.2% if the labor force participation rate was the same as when Obama took office in January 2009.
If the participation rate had just stayed the same as last month, the unemployment rate would be 8.4%.
The broader U-6 unemployment rate, which includes part-time workers who want full-time work, is at 14.7%.
Unemployment rates for teenagers 16 to 19 years is at 24.6%, Blacks at 14.1%, and Latinos at 10.2%.
The Wall Street Journal explains:

The decline in the unemployment rate wasn’t because more people had jobs. In fact, the number of people employed as measured by the household survey declined by 119,000. The fall came from fewer people looking for work in August and dropping out of the labor force.

The number of jobs added to the economy and the unemployment rate come from separate reports. The number of jobs added — the 96,000 figure — comes from a survey of business, while the unemployment rate comes from a survey of U.S. households…

[The unemployed] number declined by 250,000 in August, but it was overwhelmed by a 368,000 drop in the size of the labor force. That suggests that many of those 250,000 stopped looking for work not because they found a job, but because they dropped out of the labor force.

Employment report based on 2 surveys: (BLS)
The household survey (a.k.a. Current Population Survey) provides information on the labor force, employment, and unemployment that appears in the “A” tables, marked HOUSEHOLD DATA. It is a sample survey of about 60,000 eligible households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor Statistics (BLS).

The establishment survey (a.k.a. Current Employment Statistics Survey) provides information on employment, hours, and earnings of employees on nonfarm payrolls; the data appear in the “B” tables, marked ESTABLISHMENT DATA. BLS collects these data each month from the payroll records of a sample of nonagricultural business establishments. Each month the CES program surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual worksites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls. The active sample includes approximately onethird of all nonfarm payroll employees.

U-6: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor.

The official unemployment rate exclude people who have stopped looking for work. The unemployment rate is calculated by dividing the number of unemployed by the total number of people in the labor force. WSJ: “The unemployment rate is calculated based on the number of unemployed — people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things.”

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